Lecture Notes in SBI401I – Accounting (Major Elective 1 – SAP)
In this section, we explain how to define the following organizational entities relevant for Financial
Accounting:
a) Company
b) Company Code
c) Credit Control Area
d) Business Area
e) Consolidation Business Area
f) Functional Area
g) Controlling Area
h) Operating Concern
Company
A company (also known as an internal trading partner) is an organizational unit used for
consolidation purposes. In general, you don’t post directly to a company; instead, you assign a
company code to a company and then post to that company code. By assigning a company to a
company code, the company inherits the postings of the other company codes assigned to that
company. In addition to being assigned to a company code, a company can also be assigned to
customers and vendors, which help you keep track of the transactions against your business
partners.
Company Code
You can create a company code in two ways:
1. Copy an existing company code and then change the necessary settings (e.g., the company
code description, the currency, etc.). The system automatically performs most of the
necessary customizing settings, copying them from the reference company code.
2. Create a company code from scratch; in this case, you need to perform all of the company
code customizing settings step by step.
Credit Control Area
The credit control area is the organizational unit under which the credit management tools of
Financial Accounting are managed. It can be company-code-specific, or comprise more than one
company code. (See Section 2.2.2, Company Code to Credit Control Area, for more information
about the relationship between the credit control area and the company code.)
Business Area
The business area is an organizational unit that you can use freely for internal or external reporting
to depict segmentation of you business within or across company codes. The business area is
available in general ledger reporting (in both the classic General Ledger and the new SAP General
Ledger), and can be set up in the special ledger tables.
Lecture Notes in SBI401I – Accounting (Major Elective 1 – SAP)
Functional Area
With the functional area, you can keep track of the macro-departments where costs and revenues
arise, for example:
a) Administration
b) Production
c) Procurement
d) Sales
e) Human Resources
This type of accounting (i.e., accounting by department) is called cost-of-sales accounting.
Controlling Area
The controlling area is the organizational unit under which the Controlling (CO) module works. Cost
centers, profit centers, WBS elements, internal orders, and cost elements are all objects whose
master data are managed under a controlling area.
Operating Concern
The operating concern is the organizational unit that occupies the highest level of the SAP
organizational hierarchy. It is used in the Profitability Analysis module, where you can analyze the
profit and loss of your company according to multiple dimensions, such as customers, regions,
products, and so on. You assign controlling areas to exactly one operating concern; thus, each
company code is also assigned to exactly one operating concern. Refer to a CO manual for a
comprehensive guide to the creation of the operating concern and the configuration of the
COPA SAP module
Business Area to Consolidation Business Area
You assign each business area to a consolidation business area using Transaction OBB6. The system
presents all of the business areas available in the system and allows you to assign them to a
consolidation business area in the Consolidate Business Area column. This is all you need to do
under the Enterprise Structure definition.
Note that the consolidation business area has a very limited use in the SAP environment; as such,
you should make an in-depth investigation before deciding to use this organizational unit in your
SAP implementation. For example, unlike the business area, the consolidation business area isn’t
updated in the general ledger
Company code to Controlling Area
You assign each company code to a controlling area to manage your internal controlling in an
integrated way. Note that activities such as internal allocations of costs can be performed between
objects (such as cost centers) that belong to different company codes only if the two company
codes belong to the same controlling area.